His firm, Hibernian Pacific Holdings, last month signed an agreement to buy an office park in Germany for €80 million ($108 million). That was Mr. Joseph's first European deal. He aims to buy property or loans valued at as much as €600 million this year, about three times what he anticipates buying from U.S. banks.

"Europe right now is the best opportunity I've seen in the past 10 years," says Mr. Joseph, Hibernian's chief executive. "We're seeing banks that traditionally looked to sell to private-equity behemoths beginning to look at other solutions."

With concerns easing in Europe over the possibility of the euro collapsing, banks are picking up the pace of selling off distressed real-estate assets.

European banks are only about a quarter of the way through the process of reducing, through sales, repayments and write-downs, as much as €600 billion of commercial-real-estate assets left over from the boom years, according to
Morgan Stanley
.

This year, Europe-based banks are expected to sell €25 billion of commercial real estate and loans, up from €21.7 billion in 2012 and $14.9 billion in 2011, according to Cushman & Wakefield Inc.

So far, the major buyers of these assets have been big U.S. private-equity shops such as
Blackstone Group
LP, Cerberus Capital Management LP and Lone Star Funds.

ENLARGE

Kennedy Wilson and a partner bought Dublin's State Street building from a unit of the RBS.
Maxwell Photography

Now, a small but growing group of potential buyers also are showing up, including sovereign-wealth funds, wealthy individuals, smaller private-equity firms and even U.S. real-estate investment trusts. In a low-interest-rate environment, these investors are attracted by the potentially high yields offered by these assets.

Many of these investors are able to pay a price closer to the loan's face value than bigger private-equity firms are willing to do. That is, in part, because many of the new investors plan to hold the property for longer periods, and don't need cheap prices to profit from a quick turnaround.

That hasn't gone unnoticed by banks that are increasingly seeking out smaller, higher-priced sales to the newcomers alongside bulk asset sales to bigger investors.

Royal Bank of Scotland Group
PLC late last year sold a pair of German office buildings for $1 billion to Norway's giant government fund and AXA Real Estate Investment Managers. The bank, which often has avoided dealing with larger private-equity firms, also recently sold an office building in Dublin to Kennedy Wilson, a Beverly Hills, Calif.-based investment firm.

﻿
"We could sell it to [a private-equity firm] for 75 and they sell the building for 100, or we could sell the building for 100," says
Mark Bailie,
a senior executive at Royal Bank of Scotland responsible for reducing the bank's troubled real-estate portfolio.

In Spain,
Banco Santander
SA
in late 2011 was negotiating to sell a real-estate portfolio with a face value of €3 billion to Morgan Stanley Real Estate. But the deal collapsed, and the bank ended up selling many of the assets—mostly apartments—to individuals for less of a discount than Morgan Stanley was seeking, according to a person with direct knowledge of the deal.

Yet banks face some pressure to sell their troubled property loans sooner rather than later. Some are worried about an expected increase in delinquencies, as many medium-term leases are set to expire and tenants are unlikely to renew at prices set before the financial crisis, which would push down prices.

Buyers also are hoping to see more sales this year by the so-called bad banks being formed by national governments primarily to dispose of distressed real estate.

These include Ireland's National Asset Management Agency, which had a portfolio valued at €24 billion at the end of September, and the Spanish bad bank known as Sareb, which was set up late last year.

Meanwhile, major financial institutions with large real-estate exposures continue to collapse, feeding the pipeline of distressed assets.

Late last week, for example, the Dutch state nationalized troubled banking and insurance company
SNS Reaal
NV, which has suffered steep losses from real-estate projects in Spain, the Netherlands and the U.S.

Some veteran U.S. private-equity investors say size and experience gives them an advantage over the newcomers, which will have to navigate Europe's multiple bureaucracies and political systems.

"There are only a few players who can deal with large, complex, distressed opportunities," says
Ken Caplan,
head of Europe for Blackstone. The firm, which has 55 employees in Europe and has operated there since 1996, invested $3.5 billion in equity there last year, its biggest year ever.

Indeed, some U.S. investors have decided to scale back. Rockpoint Group, a Boston-based private-equity real-estate firm, last year closed down its Frankfurt office. Managing member Bill Walton says his firm, which is completing a $2 billion fundraising, felt it had better opportunities in the U.S.

But many new entrants say they are making the necessary commitments to the region. Kennedy Wilson entered the European market 18 months ago to focus on the U.K. and Ireland and recently opened a Madrid office.

In December, the firm and a partner acquired a loan secured by a Dublin office building. That wrapped up $900 million of European acquisitions in the fourth quarter, with partners such as
Deutsche Bank
AG
.

Meanwhile, U.S. based real-estate investment trusts last year invested about $5.5 billion in Europe, a big increase over the previous year, according to Green Street Advisors, which tracks REITs.

That figure includes
Brookfield Office Properties
Inc.,
a New York-based property manager, which acquired buildings in London's financial district for for more than $800 million from British real-estate company
Hammerson
PLC.

Simon Property Group
Inc.,
the largest U.S. mall operator, has been talking to European banks and others about investments on the continent in the wake of its acquisition last year of a stake in French shopping center operator
Klépierre
SA
from
BNP Paribas
,
says a person with knowledge of the company.

"Distress in the European financial markets should create more opportunities," Green Street Advisors said in a report last fall.

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